Insured mortgage targets layoff-wary

But the nation's 20th-largest builder, M/I Schottenstein Homes, has decided to attack the recession head-on by offering a "Worry-Free Mortgage" -- an insured program that will pay a homeowner's mortgage for six months if unemployment strikes.

M/I, which had 1,976 home starts in 1990, builds in Ohio, North Carolina, Florida and Washington, D.C.

"Last September, when everybody was talking about recession, I started thinking: What is the most important thing on a customer's mind right now? It's job security," said Irving Schottenstein, president of the Columbus, Ohio-based company.

M/I went to Lloyd's of London to insure the program, which costs nothing for home buyers. M/I won't reveal financial details, except to say the program costs the company less than $500 for each home sold.

"It is a comfort blanket for the buyer," Mr. Schottenstein said.

But is it a bad idea for a homebuilder to focus on the recession?

"I thought about the issue of negative selling," he said. "But you'd have to have your head buried in the pillow to not realize that customers are concerned about the economy. It's addressing what people are thinking about."

Mr. Schottenstein said the reaction from customers has been positive, and the program has increased traffic in M/I communities.

The Worry-Free Mortgage isn't likely to sell a house by itself, but can give M/I a competitive edge. "You've got to have the right house and the right neighborhood. Then it can help," Mr. Schottenstein said.

Here are details of the mortgage plan:

* If the homeowner loses a job because of economic conditions -- in other words, a layoff or plant shutdown -- M/I will pay up to six monthly mortgage payments (up to $1,000 a month).

* M/I's payment covers principal and interest only, and is set at the amount of the homeowner's first monthly payment, even if payments had increased later.

* If the homeowner is receiving severance payments, M/I will not begin paying the mortgage until after the last payment. (A lump-sum severance payment would be prorated into monthly amounts.)

* M/I will make the payments even if the homeowner is receiving unemployment insurance.

* Once the homeowner finds a job, the payments end. But the homeowner would still qualify for future payments, if another layoff occurs, up to a maximum of six payments within the two years.